In this two-part blog series, we look at the potential watershed changes in how legal services are priced and how that will impact law firms’ pricing teams
A quick glance at legal press headlines or at the wealth of law firm surveys continues to highlight the inexorable rise of legal technology and generative AI (GenAI). Much of the supporting commentary (rightly) is focused on the strong capabilities these solutions will provide to law firms and clients alike, and how this innovation will ultimately support the delivery of more effective and cost-efficient solutions for both parties.
However, current commentary has yet to focus on what this actually means to those professionals who are tasked with pricing within a law firm as they continue to manage both internal (i.e., partner) and external expectations and address how to appropriately incorporate pricing legal technology as an integral part of their firm’s pricing strategy.
As part of this discussion, this blog series will look to redress that imbalance based on a wide range of conversations held over the previous 18 months with key legal pricing professionals on this very theme.
Despite the omnipresence of GenAI and discussions on its impact on the legal profession, it is still for many of us complex and confusing, and it’s a lot to understand on top of what pricing professionals already need to do.
The pricing professional’s perspective
The rapid evolution of legal technology products provides a wonderful opportunity for many in legal pricing roles today, and although there may be a few potential obstacles during the early stages, these can easily be addressed with planning.
The key themes which emerge for pricing professionals may be grouped as i) driving greater visibility and engagement; ii) the changing internal role; iii) the need for different skills; iv) the current lack of real data and measurement; and v) managing expectations. Let’s take a look at each in turn.
Greater visibility and engagement
As law firms are more proactively engaging clients in using advanced AI products in the delivery of legal matters, pricing professional are likely to enjoy much greater visibility and engagement within their own organization.
This also enables them to be much more client-facing (if they’re not already) by having a key role to play in the communication of value and the pricing of the legal solution being offered. There is also, in speaking with several senior pricing professionals who are already further down the path of this journey, the opportunity to be involved with the actual product development teams themselves or — at a more macro-level — with their firms’ innovation steering groups or committees.
Changing roles
Clearly, most pricing professionals understand that their role is changing. First, there is a much greater need to test the value of the product being proposed with the client. This can become an iterative process, and one that involves much greater client contact and engagement than a more traditional method. Not all law firm partners will necessarily be comfortable with this — either because they’re driven by a desire to own the client relationship completely or because of the potential ambiguity around how the eventual solution may actually work.
You can find more on pricing AI-driven legal services here.
Second, pricing professionals’ internal role is also going to change. Many pricing professionals already have found that they also now have the challenge of maintaining and corralling the entrepreneurial spirit within their law firm to ensure that the firm takes firm-wide investment decisions when it comes to legal technology solutions, rather than partner-driven, client-specific requests, while not losing the enthusiasm that the partners may have to explore these exciting new avenues. How pricing professionals approach this challenge can be critical. Handled poorly and it can have the unintended consequence of making a law pricing function appear to be a blocker to innovation rather than the helpful conduit it should be.
This therefore puts much greater emphasis and focus on change management. Although many in pricing currently recognize that this is already the key skill required in the successful execution of their role, nowhere is this perhaps more evident today than here.
The final impact on the changing internal role is probably the most predictable — that of time. Those currently supporting both the pricing of matters and client relationships now can add the pricing of legal technology solutions to their to-do list. Law firms need to understand the much greater demands now being placed on pricing professionals’ time and the associated impact on resourcing. Several senior pricing professionals I spoke to mentioned that their firms have actually hired a number of additional resources within the pricing team to focus solely on this area.
Changing skills
Not only will the legal pricing professional’s role change, but they may also need to change their existing skill set. Perhaps ironically, the role now becomes much more like a non-legal professional service pricing role.
Today, the pricing of legal technology requires a much more of an iterative pricing strategy, which focuses on the ability to launch a product, then test it, refine it, and validate it in the light of customer feedback. In many respects, this is similar to both software products and consumer products; but in this case, there needs to be much greater focus on identifying the underlying value proposition to the client and then the associated price level and price structure. (For example, is this a monthly subscription, priced per user, or built into an overall fixed fee for the matter?)
This process requires an awareness of minimal viable product — a concept that’s already extensively adopted within software development. In other words, what is enough to address the client’s immediate requirement rather than developing the perfect solution from the start. This concept encourages law firms to have given greater thought to, and much greater segmentation of, the services and product lines that they will offer their clients. And it will require more frequent conversations with clients to assess the value of the product and then refine it, going forward.
Finally, product awareness (rather than specifically expertise) is necessary. It’s important that those involved in pricing or who are part of firms’ pricing functions have a much greater understanding of the legal technology products and landscape as well as how these products will help support legal matters and benefit both the firm and the firm’s clients. Linked to this theme, internal pricing professionals are likely to have a much more significant role in helping educate those within their own firm and their firm’s clients on the benefits and the value of the proposed legal technology approach rather than the cost, moving these professionals in many respects into more of a commercial or sales-focused role.
The lack of real data and measurement
One additional challenge faced by those in pricing roles is the lack of real data and measurement criteria available currently. As any good pricing professional knows, it is important to be able to quantify the benefits that the product or service delivers, in order to help them develop broader internal and external business cases.
If the value of the product can be quantified, the benefits can be significant. However, law firms have so far been slower to capture and quantify how this can help them and their clients using real-life situations, certainly with any degree of comfort. Perhaps as a consequence, few law firms to date have been able to draw a direct line from implementing pricing legal technology services to an associated increase in firm profitability.
Unfortunately, many law firms have yet to assess the impact that advanced AI technology like GenAI will have on their profits, and very few monitor the return on their investment of these technology purchases. This can make the development of a compelling business case, both internally and externally, extremely difficult.
In the concluding part of this two-part blog series, we look at how pricing professionals can best manage the expectations and promote “fair value”. (Portions of this blog series have appeared previously in the author’s book, Smarter Pricing, Smarter Profit, and in previous articles.)
